Commodity Currencies Hit Hard, RBA Minutes Upcoming

Declines in gold, oil and stocks knocked down commodity currencies on Monday amidst fresh concern and rumours about Greece. The yen was the best performer, followed by USD while the Australian and Canadian dollars lagged badly. The RBA minutes will be the highlight of Asia-Pacific trading.

Talk of a Greek default proliferated after weekend Troika and EcoFin meetings failed to take action to stabilize the European periphery. Greece is expecting (and needs) a quarterly aid tranche before the end of the month. EUR/USD fell below 1.36 in early North American trading but bounced back to 1.3675 after Greeces Fim Min said a call with the Troika was productive and reports circulated that the 8B tranche is close to approval.

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Rumours were driving a large portion of trading. There was talk that Greece may hold a referendum on remaining in the Eurozone. The FT also reported that German industrial giant Siemens withdrew more than 500m from a large French bank two weeks ago and transferred it to an account at the ECB.

After the euro recovered, the big story became the sharp falls in AUD and CAD. The mix of risk aversion and commodity price declines pushed AUD/USD to the lowest since Aug 10. Gold fell 2% to $1778, oil 2.6% to $85.70 and copper 3.8% to $3.78. The S&P 500 fell 1% to 1204; shrugging off declines three times larger at European bourses.

Technically it was bullish day for the US dollar and yen as they gapped higher against all their major trading counterparts. The AUD and CAD charts look particularly bearish.

Economic data was minimal but negative as the NAHB housing index fell to +14 from +15 the worst since June. Obama laid a plan to raise $3.6 trillion over the coming decade including a new income tax on those earning more than $1 million per year.

RBA Minutes

The lone event on the calendar for the upcoming Asia-Pacific schedule is the release of the Sept. 6 RBA minutes. The Australian dollar has been trending lower since the decision to hold rates at 4.75%. The market would like more clarity about the RBAs view on inflation after the statement said it was concerned about the medium-term outlook because measures of underlying inflation have been increasing this year. Note, however, that last week the Australian Bureau of Statistics revised Q2 CPI substantially lower, helping to mitigate those concerns.